5:45 PM EST: Mac sales were the second best in our history. As you might guess, when we announced our new portables, sell-through accelerated tremendously in October, says Tim. The October YOY data on the Mac is very good. The 34 percent YOY unit increase on portables was incredible. US growth on the Mac was 2 percent; International growth was 16 percent YOY. Canada, Latin America others were over 20 percent. People were delaying purchases on rumors of a new portable. We saw that spike toward the end of the quarter.
5:43 PM EST: Question about Wal-Mart partnership. Tim says we have not enough data about the conclusion of performance. Wal-Mart reaches a tremendous amount more people than we can in our stores. They have 4,000 store fronts, they provide a level of reach beyond what we could provide ourselves, or what AT&T stores can. We also sell iPods at Wal-Mart. It was with that data and knowledge that we entered into this relationship with Wal-Mart .
5:42 PM EST: Can you buck the seasonal downtick this quarter in iPhone sales? We don't forecast product sales. But the fear we would have, and that everyone has, that the economy might slow the adoption rate of smart phones and that may keep some customers from signing up for higher contracts. We feel very good about our competitive position as I said before and extremely good about our product pipeline. (Tim)
5:40 PM EST: Asking about cash position, we're over $28 billion. All the right reasons. No new update about where it will be spent.
5:39 PM EST: I'm back. Producer Annie Pong was listening while I was on the air. A couple of things: iPod sales fell 3 percent in the US, but grew nicely internationally. The education market was down 6 percent YOY, k-12 was down 10 percent because of various State and educational budget issues nationwide; no launch date released for the upcoming operating system upgrade Snow Leopard; iPhone inventory in the channel built to 2 million units.
OK, getting back live now.
5:34 PM EST: Gonna jump onto Fast Money with an update. Be back in a sec.
5:30 PM EST: From Piper's Gene Munster: asking about pricing environment for iPhone.
Says Tim: iPhone now in 70 countries. We're constantly evaluating the best way to play in these markets. Contracts versus non-contracts.
Says Gene: No pricing umbrella is in subsidized versus non-subsidized markets?
Tim: Our objective is not to be the unit sales leader in the cell phone market. It's to build the best phone.
Gene asks about the possibility of an Apple Netbook and the sub-$500 market. Says Tim, We're watching that space, but the products in there are based on hardware much less powerful than customers want, software that is not good, small screens, cramped keyboards. Only 3 percent of the PC industry was in this category last year. But we believe the products are inferior.
5:27 PM EST: Richard Gardner from Citigroup: to Peter: You mentioned a wider range for guidance in the March quarter, but the range is considerably more narrow than the range in the December quarter. Is this because of iPhone?
Peter says, Our models are not as precise as they have been. Our visibility isn't either, he says. Last quarter, there was a billion-dollar range, but on a much bigger pie. The $400 million range is still very large, says Peter.
Tim adds, "If you think back to the timing of the guidance (last time), it is not as unpredictable today as it was in October."
Also, an update on component pricing: pretty significant price increases on DRAM, and NAND memory. Gardner wants an update on component pricing. Tim says last quarter was incredibly favorable. We saw several commodities do much better, including LCDs. Some commodities were selling at or near variable costs. Further reductions are not likely. We do expect in the aggregate favorable conditions for most commodities. When you look at it, it'll still be positive, but the falls from where we were will not be where we were in the Q1 period.
5:23 PM EST: Quick folo on gross margins: I'm assuming that GM won't average to 30 percent in fiscal '09?
Tim says, "As I look forward, I would see our GM about 30 percent in the second half of fiscal 2009. Our guidance in the March quarter of 32.5 percent is because of very affordable component pricing. Continuing to anticipate about 30 percent in the second half."
5:21 PM EST: Bill Shope: Credit Suisse
Asking about iPod and Mac pricing. Would you characterize iPhone pricing is "elastic?"
Tim says the segment is clearly "elastic," selling iPhone in US: $599 to $399 then to $199, and there was a significant jump in run rate with every reduction. We believe the $199 level that this is a compelling value, and see nothing in the marketplace that's anywhere close to it. Years ahead of anything else in the marketplace.
5:19 PM EST: From Ben Reitzes from Barclays: "Nice performance." "How's Steve, hope he's doing well. Just want to know how, if any, you'll run the company differently with Tim. Tim, do you feel like you'd be the likely candidate if the worst case scenario would happen if Steve were unable to return."
Peter: Steve is the CEO of Apple, plans to remain involved in major strategic decisions.
Tim Cook: Extraordinary depth, and breadth and tenure. They lead 35,000 employees that I'd call 'wicked smart.' Values of the company are very well entrenched. Constantly focused on innovating. We believe in the simple not the complex. Participate only in markets we can make a significant contribution. We believe in saying no to the thousands of projects so we can focus on the ones that really make a difference. Frankly we don't settle for anything less than excellence in every sector of the company. Regardless of who's in what job, those values are embedded in the company. I strongly believe that Apple is doing the best work in its history.
Ben follows with more on retail: Planning to scale down expansion? Any concerns long term if retail slows on margin? (Peter) We plan to open 25 stores in fiscal '09, half internationally. Very selective on real estate. Our stores are amazingly productive, providing outstanding service to customers. Environment around us was a bit tough. Very confident in our stores.
5:16 PM EST: Opening the call to questions now.
5:15 PM EST: Investment priority is preservation of capital. We are continuing to focus on high quality investments. Cash flow was over $3.9 billion.
Looking ahead to March quarter: We are shipping the best products in our history. Forecasting is challenging, hence the broad range. $7.6 billion to $8 billion, with gross margins of 32.7 percent thanks to stronger US dollar, favorable supply chain changes, and sequentially lower revenue.
$1.33 billion in op ex, $150 million in stock based compensation
5:13 PM EST: Now talking about margins and operating expenses. Tax rate was slightly lower than expected. Cash now exceeds $28 billion, compared to over $24 billion last quarter, an increase of $3.6 billion.
5:12 PM EST: Our stores performed very well. Ended the quarter with 251 stores in ten countries.
5:10 PM EST: Turning to retail stores, hosting 47 million, 14,000 visitors a week, selling 515,000 Macs during the quarter, half of which went to new Mac customers, despite a very difficult retail environment.
5:09 PM EST: Now talking about iPhone. 13.7 million iPhones sold to date. Well ahead of our 10 million units sold projection. We're very proud of how rapidly iPhone has been received.
5:08 PM EST: Talking about the Apple App Store. As reported, 500 million customer downloads. 15,000 apps.
5:07 PM EST: Our share of the US MP3 market is 70 percent based on NPD. Continue to gain share. Over 70 percent in UK and Australia, 60 percent in Japan. Share gains almost everywhere else. 4-6 weeks of iPod inventory.
5:06 PM EST: Three or four weeks of Mac inventory.
5:05 PM EST: Operating margin was 29.6 percent. Higher than expected. Net income was $1.6 billion. Oppenheimer is talking about Apple's non-GAAP measures. Non-GAAP adds more transparency, he says. Now talking about Mac products and services. Mac sales were up 9 percent YOY. IDC estimated the overall market contracted during the December quarter, but portables grew 34 percent. Year over year decline in desktops is a reflection of the market shift to portables. "We are very pleased with overall Mac share gains," he says.
5:03 PM EST: Peter Oppenheimer, CFO, and Tim Cook, COO will be on the call. Peter is now talking: we're extremely pleased to report record results for the September quarter; the first $10 billion quarter, and record sales of iPod.
5:02 PM EST: The conference call is officially beginning.
5:01 PM EST: As the company prepares to host its conference call, it announced that Mac sales hit 2.5 million units last quarter; iPhone sales came in slightly below expectations, 4.4 million against the 4.5 million anticipated; and iPod units blew past expectations, 22.7 million units versus the 18.6 million units expected. The company was able to maintain a 34.7% gross margin, which is good news, and might suggest that the company is selling more of the higher priced, higher margin iPod Touch than expected.
5:00 PM EST: Apple shares are soaring on the earnings news this afternoon that had the company beat EPS expectations by a staggering 39 cents a share, $1.78 versus the $1.39 consensus. That news came on better than expected revenue of $10.2 billion, versus the $9.74 billion expected. Makes it kind of hard to argue that the recession will hurt Apple as much, if not more, than all its competitors when Apple beats, and by this much.
We're just minutes away from what some are calling the most anticipated earnings and conference call in Apple's history.
Tim Cook - the acting CEO now that Steve Jobs has taken a medical leave — will be front and center.
I'll be live blogging when the call begins which is set to begin at 5pm/ET.
Questions? Comments? TechCheck@cnbc.com